South Korea’s ICO Ban Will Not Be Lifted After Regulator Found Projects Acted Illegally
South Korea will not lift the ban it imposed on all initial coin offerings (ICOs), the country’s top financial regulator announced yesterday.
The move to maintain the status quo comes at the end of an investigation that has found a number of ICO projects to have violated rules.
At the same time, the Financial Services Commission (FSC) has reiterated its earlier caution to the public about ICO projects, referring to investing in tokens as “high risk” activity.
The latest decision from the FSC was reportedly informed by damning results of a study carried out by the Financial Supervisory Service (FSS).
According to the survey, some token sales that were allegedly conducted overseas had allowed participation from local investors, illegally raising funds from Koreans.
The regulator’s report says that starting September 2018, the FSS sent questionnaires to 22 local firms that had conducted their coin offerings abroad. Of these, 13 are said to have responded.
The FSS revealed that the companies in question had held their token sales beginning mid-2017, and had raised 566.4 billion won ($509 million) in total.
As per the FSS survey, some of the firms set up paper companies in places like Singapore and purported to hold their coin offerings from there as they tried to circumvent the ban.
However, the research has found out that these firms still ended up raising funds from investors within South Korea. Evidence of these is allegedly the use of Korean language in the ICO firms’ white papers and other promotional materials.
Additionally, some of the projects failed to disclose important information to ICO participants, including company profile, financial statements, among others. The report also reveals that some of the firms deliberately gave out false information.
The FSC says that token investors are exposed to very high risks, noting that most of the tokens had lost their value by about 67.7 percent in the months following their launch.
Reports out of South Korea last November suggested that the government would be making a decision on initial coin offerings before the year ended.
That came after Hong Nam-ki, the country’s head of policy coordination had announced October that South Korean regulators had extensively reviewed the ICO question. He noted that the FSC study would help in policy formulation.
Overall, the ICO industry has suffered massively over 2018, with most of the token projects currently languishing in a biting crypto winter.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.